Benjamin C. Litalien presented on strategies for managing a franchise. He discussed the key elements of a franchise system including growth strategies, franchise operations, franchisee support, and the franchisor-franchisee relationship. He emphasized managing each area with an integrated approach. Growth strategies included single site, multi-site, and area development licenses. Effective franchise operations require extensive documentation, training, and ongoing development. Franchisee support involves launch assistance, building the business, and ongoing operations support from the home office and field staff. The relationship depends on leadership, knowledge transfer, and continual system development.

1. Strategies for
Managing a Franchise
presented by
Benjamin C. Litalien, CFE
Doing Business 2.0:
Starting and Growing a Franchise
February 9th, 2012

2. “Strategies for Managing a Franchise”
Today‟s Objectives
 Give you perspective on the key
elements of a franchise system
 Provide you with practical
information about franchising
 Give you actionable ideas to
consider pursuing a franchise
 To create more “students of
franchising”
Doing Business: 2.0 2012 © Copyright - Franchise Well, LLC

3. “Strategies for Managing a Franchise”
Franchise Building Blocks
 Must Manage Each Area:
 Growth Strategies
 Franchise Operations
 System / Franchisee Support
 Franchisor / Franchisee Relations
 Formulating an integrated approach
 Getting easier everyday!
Doing Business: 2.0 2012 © Copyright - Franchise Well, LLC

4. “Strategies for Managing a Franchise”
Growth Strategies
 Single Site
 The right to operate one franchise unit
 Predominant strategy for franchising
 Provides high-touch process
 Numerous risks (competition, density)
 Key Considerations
 What are your financial goals?
 Can the franchise concept accommodate my goals?
 What does the future look like?
Doing Business: 2.0 2012 © Copyright - Franchise Well, LLC

5. “Strategies for Managing a Franchise”
Growth Strategies
 Multi-Site
 The right/obligation to operate multiple units
 Provides better economies-of-scale
 Can be good health predictor of franchisor
 Numerous risks (capital invested, site
economics )
 Key Considerations
 Canyou manage multiple sites?
 What is the make-up of the franchise system?
 What does the future look like?
Doing Business: 2.0 2012 © Copyright - Franchise Well, LLC

6. “Strategies for Managing a Franchise”
Growth Strategies
 Area Development
 This license usually grants the franchisee the right to
open a certain number of franchises in a given area.
 There is usually a production schedule where the
area development franchisee must open a certain
number of franchises during a certain period.
 As long as the area development franchisee stays on
track in opening franchises in the area, he/she has an
exclusive area where no other franchisees are
allowed to open a franchise.
 Becoming very popular with franchise systems
Doing Business: 2.0 2012 © Copyright - Franchise Well, LLC

7. “Strategies for Managing a Franchise”
Growth Strategies
 Area Development, continued
 Generally you pay reduced franchise and
royalty fees but requires significantly more
capital
 Rapidly expanding concept but attractive
primarily to investors
 Provides for faster market penetration but
can dilute the quality of single-site results
 Key Consideration
 Can you afford it?
Doing Business: 2.0 2012 © Copyright - Franchise Well, LLC

8. “Strategies for Managing a Franchise”
Franchise Operations
 Operations is the backbone of the system
 Extensive documentation on operating the
concept
 Must be able to attract „non-experience‟ operators
 Must be able to create success within a
reasonable time frame
 Creates the necessary „web‟ to connect all the
franchise system components
 Eliminates „guessing‟ by franchisees and support
staff
Doing Business: 2.0 2012 © Copyright - Franchise Well, LLC

9. “Strategies for Managing a Franchise”
The Value of Your Time
“A franchise system must allow an owner
to ‘stick to the knitting’ of the business.
Many entrepreneurs simply spend too
much time on tasks not associated with
their overall mission.”
- Fred DeLuca,
founder of Subway
Doing Business: 2.0 2012 © Copyright - Franchise Well, LLC

10. “Strategies for Managing a Franchise”
Franchise Operations
 Two basic platforms
 Retail stores
 Foodservice, Automotive, Education
 Requires a „location‟ which drives up
complexity and cost
 Service providers
 Handyman, Residential/Commercial
Cleaning, Pet care
 New energy in the sector driven by
advances in technology
Doing Business: 2.0 2012 © Copyright - Franchise Well, LLC

11. “Strategies for Managing a Franchise”
Franchise Operations
 Retail stores
 Complexities include:
 Site Selection
 Lease Negotiation
 Construction
 Signage
 Changing demographics, consumer trends
 Economics
 Local laws & jurisdictions
Doing Business: 2.0 2012 © Copyright - Franchise Well, LLC

12. “Strategies for Managing a Franchise”
Franchise Operations
 Service providers
 Complexities include:
 Customer Service
 Customer Engagement
 Hiring & training of consistently competent staff
 Monitoring of authorized activities
 Compliance with system requirements
Doing Business: 2.0 2012 © Copyright - Franchise Well, LLC

13. “Strategies for Managing a Franchise”
Operational Elements
 Manuals
 Critically important for consistency
 Often tied to Franchise Agreements
 Information Systems
 The communications „web‟ connecting all
operational elements
 Training & Ongoing Development
 Dedicated versus Outsource
Doing Business: 2.0 2012 © Copyright - Franchise Well, LLC

14. “Strategies for Managing a Franchise”
Franchisee / System Support
 “After the Sale”
 Franchise Launch
 critical time for relationship building
 big „let down‟ time after training
 Building the Business
 gradually gain independence
 franchisor must not „let go‟ too soon
 Ongoing Operations
 franchisee should assume leadership role
 try to stay „in the boat‟ with franchisor
Doing Business: 2.0 2012 © Copyright - Franchise Well, LLC

15. “Strategies for Managing a Franchise”
Franchisee / System Support
 Home Office
 Back-office support
 Accounting, call center, warehousing, procurement
 Advertising/marketing materials development
 Field Staff / Offices
 On-site, in-store, territory relationships
 Systemic evaluations
 Periodic Gatherings
 Convention, vendor meetings, special events
Doing Business: 2.0 2012 © Copyright - Franchise Well, LLC

16. “Strategies for Managing a Franchise”
The Relationship
“What does the franchisee want? What they
would do for themselves if they weren‟t
running the business everyday!”
-famous franchise expert
 Knowledge Transfer
 Competition, industry know-how, regulation
 Newsletter, bulletins, „data dumps‟
 System Development
 Increased efficiency, growth, alliances
Doing Business: 2.0 2012 © Copyright - Franchise Well, LLC

17. “Strategies for Managing a Franchise”
The Relationship
 It‟s a matter of leadership
 must be driven from the top
 must permeate the entire organization
 must be documented in FDD
 How can you know?
 talk to several franchisees
 visit corporate headquarters
 read the FDD
Doing Business: 2.0 2012 © Copyright - Franchise Well, LLC

18. “Strategies for Managing a Franchise”
A Consumer Perspective
"That's the name of the game ... pleasing
the customer. If we ever lose sight of that
fact, we've lost the ball game."
-Ray Kroc
Doing Business: 2.0 2012 © Copyright - Franchise Well, LLC

19. “Strategies for Managing a Franchise”
Leveraging Franchise Power…
 Unique Aspects in Franchising:
 Shared Risk – don’t reinvent the wheel
 Communal Learning – concept enhancement
 Association – education, R & D
 Liquidity – documented higher resale value
 Economies of Scale – buying power
Doing Business: 2.0 2012 © Copyright - Franchise Well, LLC

20. “Strategies for Managing a Franchise”
Influence is Local…
 Your most powerful position
 Leverage of your franchise
“We find that large cascades of
influence are driven not by influential's
but by a critical mass of easily
influenced individuals.”
-Journal of Consumer Research
Doing Business: 2.0 2012 © Copyright - Franchise Well, LLC

21. Franchising is NOT...
 A Guarantee of Success
o There are real risks to consider
o It‟s easier to get in than out of a
franchise
 For Everyone
o You must be willing to give up some
personal preference for the good of the
system
o You need plenty of working capital
 A Short-Term Commitment
o Average contract is 10 years
Doing Business: 2.0 – Starting a Franchising 2012 © Copyright - Franchise Well, LLC

22. Thank you!
Ben Litalien, Principal
Franchise Well, LLC
www.franchisewell.com
ben@franchisewell.com
540.657.1427 cell 540.845.2885
Doing Business: 2.0 – Starting a Franchising 2012 © Copyright - Franchise Well, LLC